Hill-Burton Facilities Compliance & Recovery

Compliance Alternatives

The uncompensated services regulations have been amended several times to provide compliance alternatives for qualified facilities. These alternatives allow for facilities to reduce much of the procedural and reporting requirements. These facilities operate their own programs of discounted health services in lieu of operating under the general Hill-Burton requirements:

Public Facility Compliance Alternative (PFCA): publicly or quasi-publicly owned and operated facilities. In support of their discounted health services programs, eligible facilities must receive over a 3 year period, an average of 10 percent of their revenues from State and local governments.

Small Annual Obligation Compliance Alternative (SOACA): facilities with annual compliance level of not more than $10,000. The threshold amount is adjusted annually by the CPI beginning in 1988.

Community Health Centers (CMC), Migrant Health Centers (MHC) and certain National Health Service Corps (NHSC) Sites Compliance Alternative: eligible facilities must be current recipients of funds under Sections 329, 330 and 334 of the Public Health Service Act.

Charitable Facility Compliance Alternative (CFCA): facilities whose mission and purpose are substantially supported by charitable and state and local governmental entities at an average level for the past 3 years equal to ten percent of total revenues: or which provide all of their services to all persons seeking services with incomes up to double (triple, if nursing home) the poverty guidelines.

Unrestricted Availability Compliance Alternative (UACA): Title VI facilities which offer all of their services to all eligible individuals who request uncompensated services with incomes up to double (triple, if nursing home) the poverty guidelines.

Financial Inability Claims

This notice contains guidance for facilities which are unable to provide Hill-Burton uncompensated services at their Adjusted Annual Compliance Levels (the annual compliance level plus the accumulated deficits).

A facility assisted under Title VI or XVI of the Public Health Service (PHS) Act is required to provide uncompensated services at its Adjusted Annual Compliance Level. Some facilities, because of financial inability, might not be in a position to make available a reasonable volume of service to those unable to pay. That means that their financial condition is so weakened that providing uncompensated services at their Adjusted Annual Compliance Level would cause serious financial harm to the facility. Section 124.503 of the regulations permits a facility in this circumstance to file a claim of financial inability seeking temporary relief from these obligations.

The Hill-Burton uncompensated services regulations do not permit the Secretary of the Department of Health and Human Services to waive the uncompensated services requirement. The approval of a financial inability claim for a Title VI assisted facility will permit the facility to make up its deficit at any time during its period of obligation or it allows a facility to extend its obligation period beyond 20 years in order not to cause undue financial hardship. The unmet obligation amounts must be satisfied in the future in accordance with a schedule set by the Department and will be increased each year by the Consumer Price Index for medical care. A Title XVI assisted facility (which is not also obligated under Title VI) is not required to make up a deficit due to financial inability or lack of community need.

In deciding whether to file a claim of financial inability, a facility should consider both its expected uncompensated services demand level and its adjusted annual compliance level. While the required compliance level may be substantial, facility experience may show that realistically actual demand for uncompensated services will not result in financial harm to the facility. In such cases, a financial inability claim should not be filed since any resulting deficit is likely related to lack of community need.

In accordance with the regulations, the following procedures, documents and guidelines will be used to review claims of financial inability.

Financial Review and Evaluation CriteriaTo be considered for a deferment of its Hill-Burton uncompensated services deficit obligation, the facility must equal or be worse than the thresholds of one of the financial indicators listed below within the last 5 years. Applications that fail to meet at least one threshold level will not be considered. Therefore, facilities should be certain that they meet eligibility before submitting an application.

The financial indicators, calculations, and thresholds are as follows:

c. Days in Accounts Receivable more than l00 daysNet Patient Accounts ReceivableNet Patient Revenue/365 days

d. Days in Accounts Payable more than 120 daysTrade PayablesTotal Supplies Expense/365 days

e. Net Income and Noncash Expenditures as a Percentage of the Uncompensated Care Requirement for the Year must be less than 25 percentNet Income+Depr.+Amort.+Other Noncash Expenditures x 100Uncompensated Care Requirements for the year

Documentation Required from Facility

a. Audited financial statements: Audited financial statements for the most recent 5 years are required. These statements must include comparative balance sheets, comparative income statements, unrestricted and restricted funds statements, a statement of source and application of funds, days in accounts receivable, days in accounts payable, and auditor's notes to statements.

b. Calculation of the Financial Indicators: The facility is required to calculate, for each of the most recent 5 years, the five financial indicators listed under - Financial Review and Evaluation Criteria. The figures used in the calculations must be clearly referenced to the accounts in the audited financial statements.

c. Statistical Data (from the Medicare Cost Report --Form 2552 or other source): Data for the same years as the audited statements must include bed size, percent occupancy (4 digits), average per diem inpatient cost, average number of employees, inpatient days, admissions, discharges, average length of stay, number of clinic visits.

d. Proposed Deficit Make-up Schedule with Narrative: A deficit make-up schedule (including dollar amounts per year) with narrative explaining the reasons for delay is required. We would normally expect the deficit to be made up within 3 years, however we would consider up to a 5-year extension if the documentation justifies such action. If the facility is unable to make up the deficit within these time periods, it may reapply for a financial inability extension at the end of the initial approval period with updated information.

The HRSA Division of Facilities Compliance and Recovery will notify the facility in writing regarding the approval or denial of its financial inability claim within 60 days after receiving all of the required documentation.When a facility submits a financial inability claim it will not be required to adopt and implement an AAP until a decision is made by the Department on that request. If the claim is denied by the Department, an AAP will be required. If the claim is approved, the facility will then be required to submit an AAP based on the revised adjusted annual compliance level.

About Hill-Burton, Titles VI & XVI

$4.6 billion total grants and $1.5 billion total loans between 1946 and 1997

6,800 health care facilities in more than 4,000 U.S. communities

Title VIIn 1946, Congress passed P.L. 79-725, the Hospital Survey and Construction Act, sponsored by Senators Lister Hill and Harold Burton and widely known as the Hill-Burton Act. It was designed to provide Federal grants to modernize hospitals that had become obsolete due to lack of capital investment throughout the period of the Great Depression and World War II (1929 to 1945). Hill-Burton hospitals were required to provide uncompensated services for 20 years after receiving funds.

Title XVIIn 1975, Congress enacted an amendment to the Hill-Burton Program, Title XVI of the Public Health Service Act. Facilities assisted under Title XVI were required to provide uncompensated services in perpetuity. Title XVI transferred the enforcement responsibilities from States to the Federal government, and required more stringent investigation, monitoring and compliance standards. In 1979, regulations established compliance levels, eligibility, record maintenance, and reporting requirements.